IDC FUTURESCAN
is a collection of metrics of IT industry leading indicators and customer
surveys. Values are based on expectations of future growth, with a value
of 1000 equating to zero growth and each 10 points representing roughly
1% of expected growth.
These are external indicators only and don't represent IDC's
forecast for the market, which is based on many more inputs and which
relies on strict methodologies and market definitions.
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This Month's Results
This month's FutureScan comes on the far side of the great divide known as October 2008. Or perhaps September-October 2008. The bailout of Fannie Mae and Freddie Mac took place on September 7, Lehman Brothers went bankrupt on September 15, the U.S. Congress passed its financial rescue plan on October 3, and since then the stock market has had some of its biggest ups and downs in history.
And we watched it all happen. For the first time since we started publishing FutureScan in August 2004 we took a mid-month reading.
By mid October the macro economic news had driven the Market Indicators below 1000 (predicting less than zero growth in the next twelve months).
But a mid-October poll of CIOs and Line of Business execs showed little deviation from the poll at the beginning of the month. By the end of the month, however, the buyers had caught up with the market.
Now we pick up the pieces.
If there is good news, it's this: IDC does not believe that IT spending will go negative in the next twelve months. Investing in IT can help cut costs in other areas of a company; and even bankrupt banks need computers to manage what transactions they have. Or are we whistling in the graveyard?
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History
Here you can see the drama of October. At the beginning of the month we tracked a minor fall in economic indicators, but a minor uptick in buyer expectations.
Then, at mid-month a new reading (and buyer poll) showed the market indicators plunging, but another minor uptick in buyer expectations.
By the end of the month, though, buyer expectations had caught up - with a vengeance.
Now the question is: is this where it ends? IDC's new IT market forecast comes out early in November. By then things may have settled down - but whether they settle into slow decline, slow growth, or neither we won't know for a while.
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Long Term History
To put the current decline in perspective, we have plotted FutureScan since we first started it nearly five years ago.
The long term slowdown is apparent, although 2004 and 2005 were pretty good years, coming on the rebound from 2001-2003. Buyer expectations, vacillating the first two years, seemed to settle in once long term expectations for the economy cooled.
Now we see in stark relief the sudden plunge.
For the first half of the five years IDC's forecasts tended to be lower than the market and buyer indicators, for the last generally above. Over the five year period the IDC forecasts have been better predictors of IT spending than either of our indicators.
We are redoing forecasts at IDC now given the sudden change in the economic outlook - to zero percent GDP growth in the U.S. in 2009. The IDC forecast may drop in half, but we don't expect it to go below zero.
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Buyer Intent
History: |
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"What a difference a day makes," goes the line in the 1959 hit by Dinah Washington. Well, what a difference half a month makes. At mid-month IDC polled its Enterprise IT panel and got a lukewarm reaction to the unfolding financial crises, although researchers noted that those polled later in the survey were more pessimistic.
So we polled again at the end of the month, and the impact of the global financial crises was apparent.
(Note: to avoid burning out our IDC's Enterprise Panel respondents, for the month-ending poll we used a third-party panel with the same buyer profile and same questionnaire. We see no reason the two panels wouldn't compare.)
IDC's opinion of these buyer opinions is that they will bounce back in subsequent months, as they did with Katrina.
And although the economy is worse than it was in 2002, when IT spending growth had its worse year in 40 years, we think IT is in a stronger position this time. No Y2K IT acquisition bubble, no dot com IT acquisition bubble. IT has been running close to the bone for several years.
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Market
Indicators History |
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In October, the 2009 GDP forecast for the U.S. dropped from 1.5% to 0%, the profit forecast went from positive to negative, and the S&P 500 lost 17%. You can see that in the blue line. The only reason the macroeconomic indicator went up from mid-month is the mild stock market rebound during the last week of the month.
Wall street revenue forecasts also dropped, although there is surely some inertia in them as first, analysts need to redo their forecasts, then the data base companies need to capture them. Finally, IDC need to massage them.
Our expectation? The two lines will converge in coming months. How far one goes up and the other goes down remains to be seen.
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The Buyer Intent metric is based on surveys of 400-500
U.S. CIOs and line-of-business executives on their expectations
for IT spending growth during the next 12 months. Results
are carefully weighted to be representative of the U.S.
market. These surveys are conducted monthly by the Quantitative
Research Group (QRG) within IDC's Global Research Organization.
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The Market Indicator metric combines inputs from economic
and IT industry supply-side indicators including:
- The stock market (S&P 500 over last 6 months)
- Current interest rates
- The current GDP forecast for the next 12 months
- The current US corporate profit forecast (next 12 months)
- The IDC IT Revenue Forecaster (% revenue growth expected
next 2 quarters)
IDC combines and weights the inputs using information
developed in its Leading IT Indicators program on the
relationship of macroeconomic trends to IT spending.
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IDC FUTURESCAN is a collection of metrics of IT industry leading indicators
and customer surveys. Values are based on expectations of future
growth, with a value of 1000 equating to zero growth and each
10 points representing roughly 1% of expected growth.
These are external indicators only and don't represent
IDC's forecast for the market, which is based on many
more inputs and which relies on strict methodologies and market
definitions.
For more information about any of IDC's Black Books or other
GRO products, please contact Amie White at [email protected]
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